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Thomson Medical Centre
Price – $0.57 Target – $0.76
The Singapore government announced a new enhanced parenthood package to encourage couples to have more children. Hence, this would benefit the three medical providers (Raffles Medical Group, Parkway and Thomson), as all three provide O&G services. However, with its focus on O&G services, we believe Thomson Medical Centre (TMC) would stand to benefit the most from the expected increase in demand for such services. The enhanced Package also bodes well for its Thomson Fertility Centre, as couples may be more willing to seek fertility treatments. Among the private hospitals, TMC’s average hospital bill is one of the lowest (based on 50th percentile bill size), making it an attractive private hospital to go to for baby deliveries. Coupled with the enhanced Package encouraging couples to have more babies, we expect the volume of deliveries at TMC to increase, boosting its revenue and earnings growth. We maintain our earnings estimate of $11.2m (EPS: $0.038) for FY08 and $12.3m (EPS: $0.042) for FY09. Maintain BUY. – DMG & Partners (22 Aug)

AusGroup
Price – $0.46 Target – $0.95
AusGroup reported disappointing net profit of A$14.4m (-25% Y/Y). The company reversed the A$10.3m provision made in 3Q08 for the contract dispute relating to the fabrication and construction contract of an integrated ammonium nitrate facility in Australia with CSBP. Excluding the reversal, 4Q08 would have been a loss of A$4.6m. The weak results came on the back of 1) project cost overruns; and 2) slower-than-expected growth at subsea division Cactus. While A$10.3m reversal was made, no payment has been received yet. Gross margin declined from 17.8% to 12.7% caused by cost overruns in a few projects due to weak project management. Cactus also grew slower than management’s expectation, registering a 16% Y/Y decline in revenue. EBIT margin dipped from 10.7% to 5.7%. We reduce our EBIT margin assumptions from 9% to 8%. As a result, we decrease our earnings estimates for FY09 and FY10 by 24% and 26%, respectively. Maintain OVERWEIGHT. – JPMorgan (25 Aug)

CapitaLand
Price – $4.32 Target – $3.70
CapitaLand’s reliance on third party capital and off-balance sheet financing could test the market’s confidence in its business model. Meanwhile, tight credit conditions, rising capital costs and weak property markets make it much more difficult to maximize the value of assets through capital recycling. With the market going through a price discovery phase, we have lowered our RNAV estimates to $6.12 to reflect slower sales, higher costs and the current market value or fair value of listed subsidiaries and associates. We have lowered our avg office capital values to $1,867 psf from $2,200 psf for 30%-owned PWC Building to reflect moderating office demand and future oversupply risks. Despite our conservative RNAV assumptions, we think there could be further downside risk stemming from: (1) unquantifiable off-balance sheet liabilities; (2) high capital costs which make it more difficult to crystallize asset values; and (3) exposure to weakening regional property markets. Downgrade to UNDERPERFORM. – Merrill Lynch (26 Aug)

Keppel Corp
Price – $10.28 Target – $9.80
Keppel Group is likely to take a combined 25% equity stake in the Sino-Singapore Tianjin Eco-City (SSTEC) joint venture. Initial investment in the joint venture will be made over two-three years, after which it should be self-funded. The JV will acquire land over 10 years with development timeframe of 10-15 years. 3-4 sq km start-up area of will be developed in the coming three-five years. Co stressed the differences between SSTEC and Suzhou Industrial Park. Keppel views SSTEC as a commercial residential project with major government-to-government support. While a worthy ambition, it is early to quantify or value SSTEC. The outcome of the disputed €66m bill for Blackford Dolphin, partly paid to allow rig mobilisation but still being disputed in full, may have larger impact on the financial results and sentiment in the near term. We maintain our UNDERPERFORM rating. – Credit Suisse (26 Aug)

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